Geneva — Global economic growth is increasingly failing to translate into new and
better jobs that lead to a reduction in poverty, according to a new report
issued by the International Labour Office (ILO) here today. In the report,
the ILO points out that within this global trend, different regions show
mixed results in terms of job creation, productivity results, wage
improvements and poverty reduction.

Taking a global view, the 4th Edition of Key Indicators of the Labour
Market (KILM) says that currently, half the world's workers still do not
earn enough to lift themselves and their families above the US $2 a day
poverty line.

"The key message is that up to now better jobs and income for the
world's workers has not been a priority in policy-making", said ILO
Director-General Juan Somavia. "Globalization has so far not led to the
creation of sufficient and sustainable decent work opportunities around the
world. That has to change, and as many leaders have already said we must
make decent work a central objective of all economic and social
policies. This report can be a useful tool for promoting that objective."

The study finds that while in some areas of Asia economic expansion is
fostering solid growth in jobs and improvements in living conditions, other
areas such as Africa and parts of Latin America are seeing increasing
numbers of people working in less favorable conditions, especially in the
agricultural sector. The KILM also says that for millions of workers, new
jobs often provide barely enough income to lift them above the poverty line,
or are far below any adequate measure of satisfying and productive work. The
total number of working women and men living on less than $2 a day has not
fallen over the past decade although at 1.38 billion it is a smaller share
of global employment at just below 50 per cent, a decline from 57 per cent
in 1994.

The report emphasizes that in many developing economies the problem is
mainly a lack of decent and productive work opportunities rather than
outright unemployment. Women and men are working long and hard for very
little because their only alternative is to have no income at all.

The new KILM paints an in-depth picture of both the quantity and quality
of jobs around the world by examining 20 key indicators of the labour
market. The KILM covers quantitative topics such as labour force
participation, employment, inactivity, employment elasticities, sectoral
employment, labour productivity and unemployment, and qualitative issues
such as hours worked, wages, employment status, unemployment duration and
others.

Economic growth is not leading to job creation

In recent years there has been a weakening relationship between economic
growth and employment growth, meaning that growth is not automatically
translating into new jobs. The report's "employment elasticities" indicator
allows one to look at the relationship between economic growth - measured in
GDP - and two of growth's contributory variables, the positive or negative
change in employment and productivity. The biennial study found that for
every 1 percentage point of additional GDP growth, total global employment
grew by only 0.30 percentage points between 1999 and 2003, a drop from 0.38
percentage points between 1995 and 1999.

With employment growing between 0.5 and 0.9 percentage points for each
additional percentage point of GDP growth, the most employment-intensive
growth has taken place in the Middle East and in Northern and sub-Saharan
Africa. A review of other indicators, however, shows that much of the
employment growth in these regions is in the category of "self-employment"
which includes most women and men in the informal economy where working
conditions are often poor. While more jobs are being created in economies
where agriculture dominates employment such as those in sub-Saharan Africa,
many of the jobs are in the informal economy, at low-levels of productivity,
and fail to provide workers enough income to pull themselves or their
families out of poverty. For example, the number of workers living on less
than US$1 per day increased by 28 million in sub-Saharan Africa between 1994
and 2004.

By contrast, economic expansion in East Asia was sufficient to generate
employment growth, productivity growth and a reduction in the high incidence
of poverty in the region. Latin America, however, experienced a decline in
the employment intensity of growth between 1999 and 2003. At the same time,
the number of working poor in the region at the US$1 a day level increased
by 4.4 million. In recent years, economic growth in Latin America has been
relatively more employment intensive for females than for males, which
reflects a substantial narrowing of the labour force participation gap
between men and women in the region.

In both Western Europe and North America, the services sector has
experienced the most robust growth - both in terms of value added and
employment growth. Between 1991 and 2003, for every 1 percentage point of
growth in the services sector, employment increased by 0.57 per cent in
North America and by 0.62 per cent in Western Europe. However, the report
finds evidence of a divergence in employment performance between North
America and Western Europe between 1991 and 2003, with the employment
intensity of growth decreasing in the former and increasing in the latter
between 1991 and 1999, with a further significant reduction in North America
and a mild reduction in Western Europe between 1999 and 2003.

Global wage inequality on the rise

The 4th Edition KILM shows that between 1990 and 2000, wages increased
faster in high-skilled occupations than in low-skilled occupations
globally. Although these findings do not show a general deterioration of the
wage position for low-skilled workers, they do suggest widening wage
inequality between high- and low-skilled workers during the 1990s.

Rising wage inequality in the developed economies has been mainly
attributed to greater demand for higher-skilled labour, which is in short
supply and to lesser demand for workers with lower-level education. Other
explanatory factors, although of less impact, include increased trade with
developing countries and increased immigration of low-skilled workers. In
developing countries, factors impacting on rising wage inequality include
industry wage premiums resulting from changes in trade policy that favour
workers in specific industries, the increasing size of the informal economy,
which generally has lower wages and less favorable working conditions, and a
shortage of high-skilled workers.

The report concludes that the competitiveness of a high-wage economy is
not immediately threatened by lower labour costs elsewhere, as countries
with low labour costs are usually also characterized by lower productivity
levels. The report demonstrates how competitiveness is determined by the
combined outcomes of elements of the productive process - the cost of
utilizing labour (labour compensation) and labour productivity (output per
person employed) - and by exchange rate fluctuations. The report's analysis
of competitiveness in the "unit labour costs" indicator shows the following:

- In the European Union-15, it is not so much high labour costs but
lower productivity in the manufacturing sector and appreciation in the Euro
that has threatened the competitive position of the region vis-à-vis the
United States.

- The manufacturing unit labour cost level in Japan has not only been
high relative to the United States, but also in comparison with that of the
EU-15. However, since the mid-1990s, the gap has decreased due to a
moderation in wage growth in Japan, a weakening of the yen-US$ exchange rate
in 2005 and an improvement in the comparative productivity performance of
Japanese manufacturing.

- The Republic of Korea has shown rapid improvement in labour
productivity relative to the United States, but unit labour costs in the
country have increased due to rapid wage increases during the early
1990s.

- Productivity has weakened in Mexico, but because labour compensation
levels are lower, unit labour costs have also remained lower than in the
United States.

The United States continues to show the highest labour productivity
levels measured as value added per person employed. Despite faster
productivity growth rates in some European Union countries, especially the
new EU Member States, the productivity gap, measured in value-added per
person employed, between the United States and most developed economies
continues to widen. One exception is Ireland where this measure of the
productivity gap with the US has been steadily narrowing since1980. A
slightly different picture emerges if productivity is measured by
value-added per hour. This shows that some European countries are more
productive than the US and for others the gap is less wide. However, most
Europeans work shorter hours and have longer holidays than their US
counterparts.

In Central and Eastern Europe, the transition to a market economy led to
an increase in productivity but a fall in employment. The new EU Member
States show a significant advantage in terms of international
competitiveness with unit labour cost levels at approximately 70 per cent of
the US level. Increased competitiveness, however, is not benefiting the
population in terms of job creation and wages. The region shows some of the
world's highest unemployment rates and many of those not working have simply
given up the job search, as reflected in the region's high inactivity
rates.

In other key findings, the KILM shows that:

- Women are continuing to catch up to men in terms of participation in
labour markets throughout the world. Nevertheless, women continue to be
disproportionately engaged in low-wage, low-productivity and part-time jobs,
and in many regions such as the Middle East, North Africa and South Asia,
women's participation in the labour market still lags far behind.

- While the most severe working poverty is growing in Africa, it is
declining in Asia and Central and Eastern Europe.

- Youth unemployment rates are typically at least twice as high as adult
rates and are sometimes much higher. However, in most countries, the
illiteracy rates of adults are higher than those of youth, suggesting that
young people are increasingly better prepared for the labour market.

- Developed economies and the European Union are faced with a growing
number of "underutilized" labour resources, including the unemployed and
involuntary part-time workers looking for a full-time job. In both France
and Italy, the rate of "underutilized" labour reached 21 per cent in 2004,
up from 17 per cent in 1994 in France and 12 per cent in Italy.

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